Health service workers have scored a major victoryafter NHS trusts were ordered to suspend the practice of forming subsidiary companies to avoid tax.

All over England, NHS trusts are setting up “arm’s length” firms to take on work such as portering, cleaning and hospital maintenance. These involve transferring NHS workers’ jobs to the subsidiary companies.

This saves them money because businesses supplying the health service with staff do not pay VAT.

Unions say that these new companies appeal to NHS trusts because they can reduce their VAT payments, and cut the pay and pensions for any new staff recruited. The health workers that are being transferred tend to be the lowest paid within the NHS, such as porters and cleaners. Workers at many trusts are resisting the plans.

Mr Jarrett-Thorpe argued that creation of subsidiaries is not “the correct prescription for financial efficiency in the NHS” after years of government cuts which have put the NHS in England “under serious and unprecedented pressure.”

NHS Improvement, the body which oversee the NHS Trusts has now responded by ordering trusts to put the establishment of subsidiaries on hold pending “new guidance” in October.

Unite welcomed the decision, with Mr Jarrett-Thorpe saying: “We regard this as a significant victory in Unite’s long-running campaign to stop the creation of such subsidiaries – and then to reverse them.

“We believe this is in the best interests of patient safety and our members, who wish to remain employed by the NHS and not outsourced to an outfit where their pay and employment conditions could be seriously eroded.”

Rehana Azam, national secretary of general union GMB, warned that the creation of such subsidiaries amounted to “back-door privatisation of the NHS.”

She said: “It’s high time to put a permanent pause on the creation of these controversial shell companies that can dodge paying VAT, avoid transparency and opt out of the national agreements that safeguard us all."

UNISON head of health Sara Gorton said: “The amount of public money being frittered away on transferring NHS staff to private companies is a disgrace, especially at a time when there’s such a huge squeeze on resources.

“These wholly owned subsidiaries are creating a two-tier workforce where new staff are likely to be far worse off in terms of their pay and pensions. There is also no evidence that these new companies improve efficiency or productivity.

“Porters, cleaners and other staff chose to be part of the NHS team, not to be contracted out and treated like second-class employees.”

Unite members will go on strike against the formation of subsidiaries in east Kent on September 24 to 28 and in York on September 27-29.